Smart Leaders Get More Out of the Employees They Have

Where do you turn for the resources you need to fuel growth? Do you hire new talent, or ask for more from your existing employees?

In growing companies, the temptation to fuel growth by hiring new talent is almost irresistible. The hiring path is especially compelling for hot growth companies; they are inherently attractive employers and can afford new resources. But before calling the recruiter, perhaps you should consider how completely you are using the resources already inside of your organization. You probably know how productively your company is using your physical assets, but do you know how deeply you are using the intelligence and capability of your people?

Let’s look at example from the heart of high-growth Silicon Valley. At Salesforce.com, Rajani Ramanathan is the chief operating officer across the products and technology division. As might be expected of a savvy engineering leader, Rajani began measuring how deeply her managers were tapping into the intelligence and capability of their teams. She then challenged her management team to raise this metric by 10%, with hopes to grow the business while also growing the people on her team. One year later, they re-measured and discovered that the subset of her management team that participated in the study collectively raised their score from 70% to 78%. Their eight-point gain is the rough equivalent of a headcount increase of 25 people.

Most companies are adept at bringing in smart, talented people but few companies put as much discipline into understanding how fully they are using the talent they’ve acquired. Many managers are so focused on their own ideas and capability that they shut down intelligence around them. I call these leaders “diminishers.” Yet other leaders seem to amplify the intelligence around them. These leaders are “multipliers.”

To determine the impact of these two types of leaders, my colleagues and I studied 150 leaders across four continents, asking their subordinates to quantify how much of their intelligence the leader was getting access to. We found that, on average, these diminishing leaders used only 48% of people’s intellectual capability. Multipliers used 95%, or twice that of the diminishing leaders. Now two years after publishing this research and assessing hundreds of additional executives, we find that, on average, managers are utilizing just 66% of their people’s capability. In other words, the managers in our analysis pay a dollar for their resources but only extract 66 cents in capability — a 34% waste.

However, the costs of under-utilized employees are far deeper than just the waste of payroll dollars. People who are underutilized by their managers described their experience as “frustrating” and “exhausting.” Inevitably, the most talented employees quit, leaving you with an expensive turnover problem. The less confident staff often “quit-and-stay” leaving you with a more destructive moral problem as disillusioned employees infect the culture.

Smart executives understand that the cheapest way to fuel growth is to first tap deeply into the resources they already have. Stretching and engaging your existing talent is also the highest-octane fuel source, as people who are deeply utilized describe the experience as “a bit exhausting but totally exhilarating.”

Too many companies are looking for talent in the wrong place. They spend their time and money “grocery shopping” for talent when they can simply look inside the already well-stocked refrigerator. In growth times, the smartest executives will look beyond hiring and focus on utilizing their company’s existing talent. And, for companies who build a reputation for aggressively developing their talent, hiring becomes a no-brainer.

Partner Center

The email and password entered aren’t matching to our records. Please try again, or reset your password. If you have a username from our previous site, start by using that. Please See our FAQ for more.

If you are signing in for the first time on the new HBR.org but have an existing account, please enter your existing user name and password to migrate your account.Please see Frequently Asked Questions for more information.